Correlation Between WESCO International and WATSCO INC
Can any of the company-specific risk be diversified away by investing in both WESCO International and WATSCO INC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining WESCO International and WATSCO INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WESCO International and WATSCO INC B, you can compare the effects of market volatilities on WESCO International and WATSCO INC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in WESCO International with a short position of WATSCO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESCO International and WATSCO INC.
Diversification Opportunities for WESCO International and WATSCO INC
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between WESCO and WATSCO is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding WESCO International and WATSCO INC B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WATSCO INC B and WESCO International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on WESCO International are associated (or correlated) with WATSCO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WATSCO INC B has no effect on the direction of WESCO International i.e., WESCO International and WATSCO INC go up and down completely randomly.
Pair Corralation between WESCO International and WATSCO INC
Assuming the 90 days horizon WESCO International is expected to generate 1.7 times more return on investment than WATSCO INC. However, WESCO International is 1.7 times more volatile than WATSCO INC B. It trades about 0.04 of its potential returns per unit of risk. WATSCO INC B is currently generating about 0.03 per unit of risk. If you would invest 15,769 in WESCO International on September 12, 2024 and sell it today you would earn a total of 2,831 from holding WESCO International or generate 17.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
WESCO International vs. WATSCO INC B
Performance |
| Timeline |
| WESCO International |
| WATSCO INC B |
WESCO International and WATSCO INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WESCO International and WATSCO INC
The main advantage of trading using opposite WESCO International and WATSCO INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESCO International position performs unexpectedly, WATSCO INC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WATSCO INC will offset losses from the drop in WATSCO INC's long position.| WESCO International vs. WATSCO INC B | WESCO International vs. Indutrade AB | WESCO International vs. Superior Plus Corp | WESCO International vs. SIVERS SEMICONDUCTORS AB |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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